I AM PARTICULARLY happy to be here to- night on the occasion of my friend Lord Har- lech's initial appearance at a Pilgrims' dinner in his new office as President. It is by way of, as you might say, an added attraction for me-in addition to the honor of being invited to join you for dinner tonight. If I may say so with reference to my friend and colleague in the profession-if I may use that term to describe our activities-of trying to finance de- velopment in the poorer countries-I refer to Lord Howick- I find myself speechless. I think that his remarks were generous, even over-generous, and so I am in just that position-speechless. Fortunately and happily from my point of view, I have a few prepared remarks which I will share with you in an effort to bridge this speechlessness resulting from the remarks by Lord Howick. Before I do so, how- ever, I should just like to say to Lord Howick: thank you very much. I AM SURE that many more pilgrims come to London these days than leave here for alien lands. Many, no doubt, are searching for fame and fortune, but many, too, I'm sure, come as I do to pay their respects-as did at least some of the pil- grims who went to Canterbury in the distant past. The thought comes easily to many Americans- and of course to many Canadians, Australians and New Zealanders as well. But apparently it also comes easily to an increasing number of individ- uals from other lands you used to rule, and this is perhaps the greatest compliment. Few nations have been able to survive the experience of empire; like Ozymandias, "King of Kings," most were able to leave only shattered statues, standing in a desert. But if the poet Shelley were alive now, he would have to revise his thoughts. For you can justly say, "look on our works, both mighty and humble, and take hope!" The fact that so many millions are so willing and eager to work with you in the time- less tasks of building a better future is the true measure of your ability to substitute a partnership of commonwealth for the trappings of empire. T IS VERY risky for one in my position to say I anything nice about empires, but I have to run that risk: A great deal of the routine of the World Bank Group is simply carrying on-with you and others-some of the great works of construction which you started in the exciting days of empire. We are helping to expand the irrigation works in the Indus Basin, just as you expanded what had been built thousands of years before you came. We are helping to modernize ports and railways which you first constructed in countries as far apart as Argentina and Thailand. Because you sur- veyed so much land and so many underground prospects in Asia and Africa, we are able to finance a wide variety of development projects in these continents today. We are helping to build dams on rivers you first studied and harnessed, and paving roads you first forced through the jungle. The examples are legion. Even the financial instruments we employ re- semble some you invented. A hundred years ago the City of London financed the construction of the Indian railways with the help of a Crown guarantee, assuring a 5% return to bondholders. And the Chancellor of the Exchequer had to make good that guarantee on more than one occasion. We raise most of our money by floating bonds in the capital markets of Western Europe and North America, and our bonds are guaranteed by all member governments of the Bank. While no government has yet had to make good on its guar- antee, all have subscribed capital to the Bank to be called upon if necessary. A dozen and a half 2 governments, including the United Kingdom, have also contributed funds to our International Devel- opment Association, which allows us to extend our work in scope and quantity without increasing the risk of having to call upon subscribed capital to make good the guarantees to our bondholders . •I HESE ARE reasons enough for me to make a T pilgrimage to London, but I have another. As an American banker, I know that Texans and Californians, New Englanders and Middle-West- erners, adopted the habit of investing some of their material surplus overseas-thanks in part to the ground you had prepared and the example you set. Now as a banker, turned stateless diplomat, it is one of my primary duties to encourage others in surplus to adopt the habit, too. I just don't think there is any other way in which the vast dis- crepancies in wealth among nations today can be prevented from breeding mounting hostility and even war. But here I appeal to you for inspiration and encouragement. The problem of persuading afflu- ent nations to invest some of their surplus over- seas involves demonstrating that the investment is worthwhile. I don't mean just "profitable" in the narrow, banker's sense. I mean worthwhile as a habit-as an ordinary exercise in enlightened self- interest, if you will. In my business we continually have to show the skeptic that we are getting some- where. And this can be a Sisyphean task. I'm going to take it for granted that you know we are getting somewhere in terms of worldwide construction. I promised myself not to inflict any statistics on you this evening, and I am not going to. But in any event statistics often serve better to support an argument than to illuminate it. And illumination is what is needed. If the unbeliever is to be convinced that we are getting somewhere, we have to make him see the construction, and not just the chaos, in the countries of Asia, Africa and 3 Latin America. We have to make him hear the sound of work over the noise of bickering and dis- sension. "Foreign affairs" these days are awfully noisy affairs. Sometimes it seems that modern diplomacy is beset with Mods and Rockers, who, like their counterparts in England and the United States, are out to vent their frustrations on all the neighbors they can reach. Govnnments have taken to shout- ing over the heads of other governments with all the gangling media of modern propaganda. In the United Nations and elsewhere government repre- sentatives have fallen into the habit of making presumptuous and preposterous claims about the aims and aspirations of people whom they do not govern. Even the growing orchestra of financial instruments, each playing its own composition of "foreign aid," seems to produce more cacophony than harmony. And while they appeal to our hearts, even the statistics of misery, so amply at hand, tend to dull our minds and imaginations through constant repetition; they become a dirge instead of an inspiration to action. OW THEN DO WE make the real and hope- H ful message of economic development heard through all this din and clamor? I have no easy answer to that question, but I'm hopeful that you can help me find one. Your Ministry of Overseas Development is already at least posing the right questions. When it comes to describing my busi- ness problems today, I can't improve on what your Ministry said in its White Paper of last summer: "The solutions to the pr:oblems of developing coun- tries are neither simple nor obvious. They will involve new methods, new institutions, new rela- tionships, new experiments. There are many paths to development. Our aim is to help the develop- ing countries find and pursue them." But why is this "our aim"? How do we make this eminently sensible message heard and under- stood more widely? I suggest we should start by 4 disentangling the real prospects from our illusions in thinking and talking about these "developing countries." I suggest that it is not so much dimin- ished prospects as it is lost illusions which prevents us from seeing the construction and hearing the work over the noisy headlines which crowd the pages of our newspapers. What shakes our confidence most, I think- whether we be bankers or just observers-is that we see so many newly-independent countries where there is not even the necessary minimum of law and order, much less even rudimentary habits of public accountability, which we have come to asso- ciate with the very idea of nationhood. We have seen one after another discard the conventional symbols-parliamentary procedures, "two-party" systems, loyal oppositions, even the rule of law- which we were taught to believe distinguished a nation from anarchy. And when we see these things we shake our heads and close our pocketbooks. But if we stop a minute and ask ourselves what we really expected, I wonder if we won't find that it isn't real prospects which have been diminished by these events, but rather some cherished illusions which have been shattered. The institutions and forms which have been discarded are, after all, transplants for the most part, and wasn't it always a great illusion to think that these people could or would work out their nationhood on the basis of transplanted institutions? Wasn't it always an illu- sion to think that they could adopt our institu- tional forms-and make them work-without our historical experience or our particular cultural heritage? And if we recognize and discard this particular illusion, can we honestly say that the prospects for genuine nationhood in these lands· have somehow diminished? I think not. If most developing coun- tries are still some way off from fashioning real nations out of their diverse peoples, they very prob- ably will do so in less time than it took the war- ring peoples of Scotland, Wales and England to 5 reconcile their differences. And it is through the process of reconciling their differences that these societies will become nations . THINK it is very parochial of us not to recog- I nize that the peoples in these developing coun- tries do differ in language, tradition and religion and often have long histories of mutual hostility behind them. This is true of little countries in Africa as well as a big country like India. If there is much chaos and bitterness among the leadership groups, it is at least in part because unreconciled differences-combined with great poverty-often leave the leaders of these countries precious little with which to rally their followers other than the most inflammatory slogans-born of real or imag- ined colonial experiences in the past. I cannot avoid seeing this great common prob- lem firsthand whenever I visit member countries of the World Bank Group in these parts of the world. This is because our work aims at engaging governments and as many people as possible around the problems of increasing their productivity. This may be done by encouraging formal planning mechanisms, covering the whole of a country's economy, as in the case of India and of Pakistan. Or it may be done by a series of much less formal and much less inclusive consultations. But in any case I can't get on with my job-and they can't get on with their economic development-unless important interest groups are brought together in one place where they can reconcile their differ- ences. The opportunities which exist in all coun- tries for concerted actions of self-betterment de- pend first on some reconciliation of outstanding differences. A ND HERE we come up against another illu- f i sion, common to our times. This is the illusion that differences cannot be reconciled within these 6 countries by what we recognize as democratic pro- cedures. There is nothing in my experience which supports such a pessimistic conclusion. Quite the contrary-as far as engaging governments and people around the problems of their economic de- velopment is concerned, democratic forms are going to be a simple necessity in nine out of ten cases. For the more real diversity which there is in a society, the more necessary it is that important interest groups have a voice in making decisions- especially if those decisions are to be translated into economic growth. I was struck with the force of this idea after reading a brilliant essay on Africa by Arthur Lewis in Encounter magazine this past summer. Pro- fessor Lewis was addressing himself to those who despair over the phenomenon of African dictator- ship. But he wasn't despairing. Lewis argued that ultimately African states must develop forms of government in which all the traditional, tribal, re- gional and racial groups have an opportunity to share in the making of decisions. Only if all have such an opportunity he wrote, "can all feel that they are full members of a nation, respected by their brethren and owing equal respect to the national bond that holds them together." Reading that passage, I got to thinking that it might help if we could somehow make the old rallying cry, "No Taxation without Representa- tion" fashionable in the context of these countries' l struggle to work out their nationhood. Today there is often neither taxation nor representation- and both are needed. I would like to see this slogan a cornerstone of the development programs of these "developing nations" today, and who knows, that might actually happen. Reconciling differences is the first order of business whether it is democracy or economic progress you are interested in. Of course the democratic forms will be different. New institutions, as your White Paper implies, are going to be the rule, not the exception, in all these countries. And it is not just new institutions of 7 government, but probably new educational insti- tutions and new types of business organization as well. We cannot predict what they will be in most places, other than that they will differ from our own-and from one another-in many ways. But isn't it quite an arrogant and self-defeating illusion to conclude that because our particular institu- tional forms have been rejected our ideals have been rejected-and our mutual interests will be ignored as well? l ATHAT WE NEED to do is to concentrate on V V real necessities, not on forms. I, as an Ameri- can, should be very sensitive to this distinction. After all, it was a long and difficult eighty years after our independence-and only one hundred years ago--that my country concluded a civil war to decide whether our Union should be one and represent all the people or whether it would disintegrate. And can I pretend that the United States would be as powerful and as "democratic" as it is today if it had become the disunited states instead? I should be the first to agonize with India and Pakistan and Nigeria as they struggle to preserve their Unions without civil war-and the first to congratulate them as they succeed. And I should be the first to see great hope in the experience, say of Mexico, where the problem appears to be working itself out and where the emergent democratic forms represent nothing so much as a unique Mexican achievement. For even in Latin America today the basic problem is one of devising indigenous institutions of government which represent all of the people-and which work. That is gradually, painfully happening in Colombia and Venezuela, in Chile and Peru-even in Argentina and, hopefully, in Brazil. It is not my purpose to make excuses for these countries, but to explain them. It will take time- a generation or more at least in most countries- before new institutions have taken root, before the 8 slogans of economic progress eclipse the slogans of resentment. The task in that time is to make the new institutions work-whatever their name. To a crucial extent the new institutions will only work as they increase productivity. And surely that argues for cultivating the habit of investing our surplus overseas-rather than despairing of lost illusions. It is through adding a measure of our experi- ence and wealth to the scarce resources available for increasing productivity in these lands that we help to live down resentment-and encourage the substitution of the slogans of economic progress. I know of no other effective way of preventing the huge disparities in wealth among nations from ultimately engulfing us all in despair and giving rise to a new and hideous kind of tribal warfare among states. Yet I read in The Economist last month, in the aftermath of our Annual Meeting that "across the world, (foreign) aid is on the de- fensive." I agree. I am worried about it. B UT IS NOT "foreign aid" on the "defensive" because it has itself bred new illusions, rather than concentrating on maximizing real prospects? Is it not because "foreign aid" has generated too simple notions about the relationship between eco- ., I nomic progress and particular political attitudes and institutions? Is it not because "foreign aid" 1 has generated some absurd expectations about the relationship between gifts of money and economic development? I have tried to suggest this evening that we do not need these too simple notions. I have tried to suggest that the works of construction with which you and we are identified around the world are the real and realistic expectations which "for- eign aid" should foster. But as I close I must record my deep concern with how the case for development assistance is presented to the people and the governments of the capital exporting 9 nations. I know, of course, of the balance of pay- ments difficulties which exercise political leaders today. I have been schooled in the budgetary and monetary problems which are exercising financial leaders. But just stop for a moment and think how these problems must look to the financial and political leaders of the developing countries. These are the problems of afHuence, not of poverty. What are they to think if we use these problems of afHu- ence as excuses for reducing our share of the help they need to overcome their problems of poverty? What is legitimate, what is indeed imperative, is to make sure that financial assistance well and truly serves to increase productivity in these coun- tries. Accountability on this score is the first duty of every responsible practitioner in my business- accountability on this score is the necessary test of whether we are getting somewhere. But had I chosen to make an accounting of the World Bank Group tonight-complete with sta- tistics-I can assure you that the accounting would have shown that the real prospects, far from dimin- ishing, have outstripped both the financial resources available and the ability of many developing coun- tries to service further conventional loans. The facts are that we have been getting on with the job in dozens of different countries-but we can't continue to do so unless countries with a material surplus continue to cultivate the habit of investing some of that surplus in development overseas. I lay this matter before you because so much of the case for cultivating such a habit rests on your example. Your experience, to me, is worth far more than gold, although I need that too. The number of pilgrims who come to London these days-from international organizations, from rich countries and from poor ones, as individuals or as officials on errands of public business-is proof enough of my faith that you can help find the right answers. 10